Competitiveness Check—August 21 Edition

The Quick Take

The United States’ revised “reciprocal” tariff framework took effect August 7. Baseline rates now sit at 15% for countries running trade deficits with the United States and 10% for those with surpluses. An additional 40% levy applies to transshipment violations.

As countries navigate the new complexity, US Trade Representative Jamieson Greer has framed the shift as part of a “new economic order solidified at Turnberry”, the site in Scotland where the July 27 US-EU trade deal was concluded. A much-anticipated joint US-EU statement on the agreement was published on August 21.

Top Five Transatlantic Trade-Related Developments

• August 1: The UK’s Financial Conduct Authority (FCA) announced it will lift its 2019 ban on retail access to crypto exchange-traded notes (cETNs) “to support UK growth and competitiveness”. The lift would mean cETNs could be sold to individual consumers, rather than just professional investors, in the United Kingdom if the cETNs are traded on an FCA-approved investment exchange. The move aligns with broader UK efforts to become a “world leader in digital assets”.
• August 6: US President Donald Trump announced a sweeping 100% tariff on semiconductor imports, citing national security concerns and the need to reshore chip manufacturing. Companies investing in US-based production, such as Apple (which unveiled a $100 billion expansion of its domestic supply chain), are due to be exempt from the levies.

• August 7: A new US tariff regime came into effect, introducing “reciprocal” duty rates across a wide range of imports. The new tariffs do not stack on top of existing Section 232 duties on autos, auto parts, steel, aluminum, and specified copper products. However, “reciprocal” duties come on top of existing Most Favored Nation (MFN) rates, except for the EU and Japan, for which the total tariff is capped at 15%, as stipulated in recent bilateral agreements.

  That same day, Lyten, a California startup developing lithium-sulfur batteries, announced that it would acquire Northvolt’s remaining assets in Sweden and Germany. These newly acquired assets were previously valued at approximately $5 billion and include 16 gigawatt hours (GWh) of operational battery production capacity and over 15 GWh under construction. Lyten plans to restart operations at Northvolt Ett and Northvolt Labs when the acquisition, which is being fully funded with equity investment, is complete.

• August 11: The European Commission launched its first review of the Foreign Subsidies Regulation. It will focus on: 1. assessing foreign subsidies that distort the internal market; 2. applying the balancing test (i.e., whether positive effects of the foreign subsidy counterbalance its distortive effects); 3. reviewing foreign subsidies with a possible distortive effect on the internal market; 4. notification thresholds; and 5. the level of complexity of the rules and the costs incurred by businesses.
• August 13: Trump signed an executive order aimed at boosting competition in the commercial space industry. The order relaxes requirements for commercial launch and reentry licenses, and calls for the elimination of environmental reviews. It also directs federal agencies to preempt state and local laws that may be hindering the development of spaceports. Under the order, a streamlined approval system will be created for emerging space technologies with the aim of encouraging rapid growth for "novel space activities" in untapped sectors.

Figure of the Fortnight

18.6%: The United States’ effective tariff rate following the implementation of Trump’s “reciprocal” tariff regime. It is the highest rate since 1934, according to The Budget Lab at Yale.

Quote Unquote

“I’ll be setting tariffs next week and the week after on steel and on, I would say, chips—chips and semiconductors. I’m going to have a rate that is going to be 200%, 300%.”

—US President Donald Trump speaking to reporters on August 15

“The 15% across-the-board tariff captures everything, including, as I mentioned, the sectors relating to pharmaceutical exports, car and car parts exports, and semiconductor exports, which will be implemented by the US shortly. … Right now, we’re focusing on extracting the maximum amount of positives from this situation. Once we have a joint statement in place, we view that as a platform from which we can continue the work to find new areas to reduce tariffs, to find other areas where we can cooperate constructively with the US. … All that being said, the countermeasures that we have now suspended can, at any moment, be unsuspended.”

—European Commission Spokesperson Olof Gill at an August 11 press conference